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Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions

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  • Cong Wang
  • Fei Xie

Abstract

We present evidence on the benefits of changes in control from mergers and acquisitions. We find that the stronger the acquirer's shareholder rights relative to the target's, the higher the synergy created by an acquisition. This result supports the hypothesis that acquisitions of firms with poor corporate governance by firms with good corporate governance generate higher total gains. We also find that the synergy effect of corporate governance is shared by target shareholders and acquiring shareholders, in that both target returns and acquirer returns increase with the shareholder-rights difference between the acquirer and the target. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org., Oxford University Press.

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  • Cong Wang & Fei Xie, 2009. "Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions," The Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 829-858, February.
    • Handle: RePEc:oup:rfinst:v:22:y:2009:i:2:p:829-858
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    File URL: http://hdl.handle.net/10.1093/rfs/hhn018
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